Question

What is the Return on Assets?

2016 (Thousands of Dollars, except Eaning per Share)
Sales Revenue		210,000.00
cost of goods sold		125,000.00
Net inocme		8,300.00
Dividends		2,600.00
Earning pear share		4.15
Hi-Tech Instruments Inc
Balance Sheets
Thoursands of Dollars	31-Dec-16	31-Dec-15
Assets
Cash	18,300	18,000
Accoutns receivable (net)	46,000	41,000
Inventory	39,500	43,700
Total Current Assets	103,800	102,700
Plant Assets (net)	52,600	50,500
Other assets	15,600	13,800
Total Assets	172,000	167,000
Liabilities and Stockholders' Equity
Notes payable - banks	6,000	6,000
Accounts Payable	22,500	18,700
Accrued Liabilities	16,500	21,000
Total Current Liabilities	45,000	45,700
9% Bonds Payable	40,000	40,000
Total Liabilities	85,000	85,700
Commin Stock $25 par value (2,000,000 shaes)	50,000	50,000
Retained earnings	37,000	31,300
Total Stockholders's Equity	87,000	81,300
Total Liabilities and Stockholders' Equity	172,000	167,000

Answer 1

Return on asset is calculated by using given below formula

Net Income /Average Assets*100

Average assets is Opening total asset plus Closing total assets divided by 2.

Here Average Assets are calculated as below

($ 172000+$ 167000)/2

Or $ 169500

Return on income is calculated below

Net Income /Average Assets*100

(8300/169500)*100

4.90%

Companies calculate Return on assets to know how much income is generated by employing assets. In other words ROA is % of Profit earned on overall assets employed by the business.